I am going through a deboccle at the moment. I am trying to think if it is worth the investment to look into getting a home and or townhome to own. First, I want to make sure that I am not wasting any money and I also wouldn't want to pay a ton for a monthly mortgage. I am not by any means looking for a huge house, just something that is comfortable to live in. I need to know peoples thoughts on this, and it would greatly be appreciated. Is purchasing a house worth the investment? How much on average do individuals pay for a mortgage? I know these are all things I could ask a Real Estate Agent but I am just curious. Thank you!

Jeremy

Wed May 22, 2013 11:10 pm

blixetPreferred Member

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I don't think of a personal residence as an investment. If you buy in a good location and get a good price on both ends, you'd be lucky to keep up with inflation after 30 years, all things considered. Interest, taxes, insurance, maintenance and repairs, etc. At least this has been my experience. Is that better than giving your money to a landlord? For you to decide. Presumably, you have to live somewhere.

As far as mortgage payments go, it really depends on the particulars: principal, rate, term are the biggies.

For example, if you purchase a $200,000 home, put 20% down and get a 30 year fixed mortgage at 3.75% ignoring other costs, you'd be looking at a monthly payment of around $740 per month. YMMV

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Wed May 22, 2013 11:39 pm

oldguySenior Member

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quote: I am trying to think if it is worth the investment to look into getting a home and or townhome to own.

The biggest factor is the length of time that you plan to own it.

1. In general, if you may move within 5 years, you need the flexilbility of a rental. The cost of buying/selling a property will eat up any potential savings.

2. But if you plan to live there for 10, 20, 30 years - then the investment of owning is worth it. The house appreciates, grows in value, but the mortgage remains fixed for 30 yrs (unlike rent that will be increased every few years). And eventually, the house is paid for and you live 'rent free'.

Be careful to compare apples to apples - ie, compare a 800 foot apartment to an 800 foot townhome, not to a 2500 foot 2-story house. That will give you wrong answers.

I have owned several houses for over 25 years (rental houses), mostr have increaed in value by 3X, some by as much as 6X - so yes, for me, it has definitely been 'worth it'.

Thu May 23, 2013 12:55 am

coasterSenior Advisor

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Re: Is it worth the investment?

quote:Originally posted by jhauglid34.... I also wouldn't want to pay a ton for a monthly mortgage....

Be sure you understand the difference between what you *pay* for a mortgage, and what you have for a monthly mortgage *payment*. What you pay is what the mortgage costs you to finance it, and that's the lowest right now that it has ever been. You might say that right now mortgages are "on sale", and who doesn't want to buy something they're going to need while it's on sale? Your monthly payment is what you pay for your financing *plus* paying back what you borrowed, and what you borrow is determined by the selling price of the house; also a number that's been on sale for some time, but is probably coming to an end. So, if you can get a house "on sale" AND you can get your financing "on sale" it seems to me to be a VERY good time to buy something you're going to want to have at some point anyway.

~Tim~

Thu May 23, 2013 5:06 am

Brownsfan2k5Full Member

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Old guy:

You always talk about how you refinanced your rental homes every few years when you had enough equity. What about when the intrest rates were around 7-8%? Have you always been able to come out ahead? Just cuerious.

Wed Jun 05, 2013 1:39 pm

Brownsfan2k5Full Member

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curious*

Wed Jun 05, 2013 9:08 pm

oldguySenior Member

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quote: What about when the intrest rates were around 7-8%? Have you always been able to come out ahead?

Yes - actually it was easy then, the SP500 Index was growing at 17%/yr. Ie, I borrowed at 8.5% to 9% and invested at 17%/yr. There was an 18 year period of 17%/yr (1981 to 1999). The differences of rates is the key - 17-9 =8%, that is better than 11-4=7%.